Amazon launched Amazon Supply Chain Services, a new service that opens its full portfolio of freight, distribution, fulfillment, and parcel shipping capabilities to all businesses, regardless of whether they sell on Amazon Marketplace. The move to tie together all of its supply-chain services in one place puts Amazon in direct competition with international transportation and warehousing giants like DSV, DHL Group, and Kuehne + Nagel International, and positions the company to take a chunk of the $1.3 trillion global market for third-party logistics services.
Peter Larsen, VP of Amazon Supply Chain Services, said:
“We first built this network over 20 years for ourselves. We then made it available to Amazon sellers. Now we’re making it available to any business of any shape or size. We think it’s a very large opportunity.”
What changed? Hasn’t Amazon offered supply chain services for a while now?
Yes, but previously, Amazon offered independently packaged services, allowing customers to hire the company specifically for e-commerce order fulfillment or shipping freight. Whereas now, Amazon is offering a fully unified service that lets businesses handle freight, warehousing, fulfillment, and last-mile delivery through a single contract and console, rather than juggling separate contracts and providers.
Additionally, Amazon is seeking to attract industries far beyond retail into its logistics ecosystem such as healthcare, automotive, and manufacturing. For example:
- Procter & Gamble is using Amazon’s freight network to ship raw materials to production facilities.
- 3M is moving products from manufacturing sites to distribution centers worldwide.
- Lands’ End is fulfilling orders on its own website and other non-Amazon marketplaces.
- American Eagle and Aerie are relying on its parcel service to handle last-mile delivery to customers.
Can Amazon be trusted with your operations data? Or will they eventually use it to compete against you?
Larsen says the company prohibits using data from its supply-chain customers to make decisions for its own marketplace and that the number of companies already using Amazon to fulfill online orders on rival marketplaces is proof of how much their customers trust them. Though I would imagine it’s hard not to pay attention when 30 crates of 3M double-sided tape get shipped through one of your planes.
What does the market think?
The markets reacted to the news with UPS and FedEx share prices dropping 10% and 9% respectively, plus double-digit declines for GXO Logistics and Forward Air, but maybe they overreacted, as Amazon has already offered many of these services for years now.
Though Amazon likely won’t take over the entire fragmented supply chain industry, the consolidated offering will bring fresh attention and investment to the space. I imagine we’ll see more consolidation across the supply chain in the coming years, as companies merge to create an end-to-end logistics and fulfillment network that can compete with what Amazon now offers under one roof.
